Pakistan and imf relationship history

pakistan and imf relationship history

Till date, the IMF has lent money to Pakistan 21 times during the last 60 years, Pak-Saudi relationship: As far as Pak-Saudi relationship is. Pakistan and the IMF: A Relation of Trust, An Article By Henri When Pakistan's Government asked financial support from the Fund nearly four. SAMAA Digital's guide to understanding IMF. All you need to know about IMF and Pakistan be more stringent than those in , due to tense relations with the US, the lender's biggest donor. Read the full story here: tv/economy//10/pakistans-imf-bailout-inevitable-but-so-is-.

This is because any meaningful reforms are impossible if the political structure does not allow them.

pakistan and imf relationship history

For this to change, our public discourse needs to take a holistic overview of our institutions. This is a contribution to that end. Digging deeper Let me explain.

Take the much talked about balance of payment crisis as an example. The most direct culprits are lack of exports and the increasing cost of imports.

Pakistan imports nearly twice as many products and services than it exports. In turn, there are many causes for low exports, some are macroeconomic determinants. The unsound infatuation of the previous government with an appreciated rupee is an example of this. Dig deeper, we are exposed to the fact that Pakistan has developed little comparative advantage over the years. Which means that we mostly export basic textiles, cotton and rice and other related products.

Most of them are low-value items in the global value chain, so we earn little revenue from exporting them, and are hence unable to cover our import bill.

Why Pakistan will go to the IMF again, and again and again - Blogs -

Dig further, we find that even in products which we do export, we face structural problems — such as lack of capital, whether it is human or financial. Hence, exporters struggle to grow, move up the value chain, compete with foreign firms, and boost productivity. But, why is this? Why does Pakistan fail to provide an environment which is conducive to developing globally competitive enterprises? There are many explanations here — but one persuasive thought is that our institutions do not create the set of incentives needed for the growth of a competitive market.

Instead, they encourage a reliance on state patronage even if it comes at the cost of the larger industrial growth. The result of this has been that, whenever Pakistan has found itself in such crises, it has been able to get loans to sail, or crawl, through the crisis.

But, all those reasons why this crisis emerged in the first place will remain — waiting to fuel another crisis down the road. It is like putting the fire out but not fixing the leaking gas socket in the basement. A good place to start is understanding what institutions are, and how they influence our collective behaviour. Think about cricket — we have certain rules under which everyone plays the game.

There has to be a fixed number of players, they have a number of balls to play with, and everyone has a consensus on how we determine which team wins. Now, apply the intuition behind this analogy to the broader institutions which shape our daily life. Like the rules which govern the game of cricket, we have humanly devised rules which govern our lives in a more consequential manner.

Our perpetual dependence on the IMF They can be formal which are written down, such as the laws of the land often codified in the constitution, or informal ones widely accepted by the population, such as kinship bonds.

pakistan and imf relationship history

These institutions are important because without them, society as we know it would collapse. But, these institutions differ from country to country, and a persuasive strand of economic literature argues that they are the key to understanding our development outcomes. We can also split them between economic and political institutions.

The IMF: Pakistan’s history and future

As a society, we decide which economic and political institutions to adopt, and these institutions shape much of our behaviour through shaping our incentives. As Acemoglu and Robinson argue, those who control the political power determine economic institutions.

So, if political power which in turn determines the political institutions is controlled by a small, extractive elite, they will set up economic institutions which benefit them, not the majority.

If the elite benefit from an economy underpinned by clientelism and patronage rather than a well-functioning competitive economy, they will choose the former. It is important to remember that there is plenty of profit in poverty.

pakistan and imf relationship history

It just happens to be controlled by few. Now, look at Pakistan.

Pas e Parda - 2-December-2018- Pm Imran Khan - IMF - Pakistan Economy

Dirty politics trumped development economics this year The Fund is flexible — as long as some cuts are made, any reductions are chased, a bit of compliance shown. Yet another factor blurs the boundaries of the dichotomy — the revolving door between the Fund and many former Pakistani state officials: Former prime minister Raja Ashraf arbitrarily appointed his son-in-law World Bank alternative executive director in with little to no fanfare. The point is this: These are the same technocrats who are responsible for drawing up budgets, cutting or saving subsidies, jobs, welfare expenditures and more.

Surely the negotiations with the IMF this time will be different?

All you need to know about IMF and Pakistan

Will the economy continue to grow despite challenges? What hope does the Pakistani economy have of securing a better deal for itself? It becomes necessary here to examine the internal structure of the IMF itself and how that shapes any terrain of negotiation. Two elements are key: Every other member nation can collectivise in groups and nominate the remaining 16 directors. A couple of interesting observations can be gleaned from the above.

pakistan and imf relationship history

Asad Umar against the World. How are we doing? Asad Umar plus seven countries with very little economic clout against the World. How does this impact the dynamics of forging loan agreements between the Fund and member states? Again, two key elements will be analysed: In it, he quotes a number of IMF employees and their experiences working at the Fund. Financial markets are watching. As far as staff missions to specific countries are concerned, Laura Papi another former IMF staffer says: The result is an almost militaristic internal chain of command between staffers and their superiors at the Fund, one that not only narrows the parameters of critical inquiry but limits any possibility for creative re-imagination of what an economy can look like and who it should serve.

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We are left with societies carved out of cookie-cutters. What Pakistan can learn about tax reforms from developing countries The rigidness in this chain of command trickles down to negotiations between IMF Mission Teams and member countries as well.

Though the Fund insists it seeks to uphold the spirit of freedom to contract with all lending nations, experience tells us otherwise.

All you need to know about IMF and Pakistan

This rigid, militaristic chain of command not only makes internal dissent a distant possibility but flexibility in negotiation an institutional anomaly. Repoliticising the Pakistani economy Three decades and very little to show for it — it is clear that the Pakistani economy is far from stable after structural adjustment. And yet, as this next government gears up for another go, there is nothing but the slow simmering of protest in a few think-pieces and opportunistic political challenges.

pakistan and imf relationship history

There is something alienating about economics. At its core, it is merely a framework through which a society decides how to divvy up the goods.